Official Unease

May 2006 | Economic Analysis

Policymakers are growing increasingly concerned over the rising currency, but we believe the won remains on course to hit our year-end KRW900/US$ target. While official intervention could slow the won's ascent in the near-term, it is ultimately futile in the long-run. Strong fundamentals and an uncertain US dollar outlook should mitigate the effectiveness of Bank of Korea (BOK) intervention. Indeed, President Roh Moo-hyun all but admitted that authorities have scant ability to reverse the uptrend. He reportedly told cabinet officers that short-term government measures to curb won strength 'were undesirable', and that excessive countermeasures needed to be avoided. Simply,

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